Teaming up for good

How real estate agent commissions will now affect us

Buyer’s agents won’t be getting a standard 2.7% commission anymore. This new policy is going to affect buyers and sellers.

You’ve heard, I’m sure, about the court ruling and the decision by the National Association of Realtors:
Buyer’s agents will no longer receive a “standardized” 2.7% commission on every residential real estate transaction.  
As you can imagine: this is all anybody’s talking about in my industry. 
The new rule is that no where on MLS will a listing agent be able to offer a buyer’s broker commission.  
Since I started selling real estate in 1999, the “norm” has been that virtually every MLS listing guaranteed a buyer’s broker payout of 2.7% that was paid by the seller.   
Everything has changed, now. 
The Internet changed our industry about 25 years ago. Realtors went from publicizing their listings in the paper-bound “MLS Book” published once a week (available only to realtors) to listing data, photos, videos, floor plans online.  
That was a big change, and so is this.  
One of the fears out there is that first-time buyers, particularly in the low-priced brackets, will not have the “extra amount of cash” to bring to the table such that their agents will be paid. The fear is that without extra money to pay the agent, the buyer will either not buy or go unrepresented, and that would be a disservice to buyers. 
My opinion:  the mortgage industry will not let that happen. The mortgage industry will immediately begin to offer programs that will roll the buyer’s broker commission into the mortgage financing.  
What I think will be different is that buyers will become price conscious, not only about the price of the home but the price and value of their real estate agent.
One the listing side, sellers have always carefully interviewed three or four seasoned professionals before listing their house. And during every one of those interviews, listing commissions is a topic of negotiation. Meanwhile, buyer’s agents have been getting 2.7% fresh out of high school. 
MY OPINION: This is the biggest change in residential estate sales since the Internet.
The U.S. Department of Justice has issued a “Statement of Interest” in response to the Real Estate Board of New York’s Settlement with regard to this Class Action/Anti-Trust Issue. In it, DOJ clearly states their position that sellers should no longer pay for the buyer’s agent.  
The statement declares, on page 3 of the 33-page document, that they would look kindly on “an injunction that would PROHIBIT sellers from making commission offers to buyer’s brokers at all.”
Buyers will be responsible for paying their agent’s commission. That’s the new deal.
How does this affect the real estate market? For consumers? For real estate agents?  
Will it lower prices in Minneapolis?  My opinion is no. Will it lower prices in Blaine?  Probably. 
Will buyers still be able to buy? Yes.  Absolutely. This ruling will not affect that. 
Who is affected most? Inexperienced and part-time real estate agents will be affected the most. I am expecting a 20% attrition almost immediately.   
One reason for this is that buyers will become more choosy about who they work with now that they are paying their own agent. They will interview more agents, just like sellers do. And they will negotiate commissions, just like sellers do.
With buyer’s agent commission rates now entirely negotiable, inexperienced buyers’ agents will have a hard time “competing on price” with experienced agents.  
The stronger buyer’s agents will likely keep most if not all of their “customary” 2.7% commission, and for that, they will deliver strong representation in what has already become a “permanent single-family housing shortage” in Southwest Minneapolis.*   
The less experienced, part-time, “brother-in-law” agents will no longer be able to count on a 2.7% commission, thus making the occasional sale far less lucrative.   
Meanwhile, many confident, educated buyers will go directly to the listing agent and present themselves as “self-represented.” They will either choose dual agency, or something else, but with eyes open. They will enter into a negotiation with a distinct spending advantage compared to the buyer who is paying their agent 2.7%.  
They won’t have the smarts of a good buyer’s agent on their side... but they will have an extra few thousand dollars. 
Buyers will become far more choosy in selecting who they want to represent them.
*The Southwest Minneapolis real estate market will always be competitive. There will never be enough single-family homes ever again in Southwest Minneapolis.   
Many of my previous columns have addressed our projected rise in city population, and the 2040 Plan that encouraged the consequent construction of large rental buildings. (See past columns at by searching for Larry LaVercombe.) Given the ratio of rentals to single family homes – combined with the old adage that “we can’t make more land in the city” – there will now and forever be a shortage of single-family homes here.  Just like in the best neighborhoods of other “compacted” and cosmopolitan cities nationwide. Minneapolis has arrived.  The housing shortage is permanent. 


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